International Petroleum’s operational success can no longer be ignored
The stock: It’s hard to find a stock that is up at all in 2022, let alone one that is up 96 percent. Yet that’s the position International Petroleum Corp. (TSX:IPCO) finds itself in after another quarterly earnings report released November 1 that substantially surpassed analysts’ expectations. It was up 6.5 percent on Tuesday alone to close at $14.48 on the Toronto Stock Exchange.
The drivers: The oil and gas sector generally has been on the right side of both the inflation shock and the Ukraine war this year. The S&P/TSX Capped Energy Index as a group has gained 57 percent. But Vancouver-headquartered International Petroleum, part of the Lundin Group of Companies, has done better still.
The Swedish-Canadian Lundin family has been dabbling in energy along with its mining interests since the 1980s. It’s twice built up exploration and production companies only to sell them (or most of their assets) to larger acquirors for huge capital gains. In 2017 the group started from scratch again with International Petroleum, which now has producing wells in Alberta, Saskatchewan, Malaysia and France.
IPCO has grown both through acquisitions and organically, for example ramping up its Blackrod heavy oil operation in the Athabasca oilsands. In the third quarter, the company’s output surpassed 50,000 barrels of oil equivalent per day, weighted two-thirds to oil, one-third to natural gas. So far this year revenue has almost doubled, to US$879 million, while net earnings soared threefold to US$277 million.
Not being connected to Calgary’s Plus-15 network of downtown walkways and comprised of far-flung assets cast off by other companies, IPCO has been under the radar of most Canadian energy investors to date. But sooner or later the results speak for themselves.
Word on the street: “In our view, this name offers one of the best risk/reward opportunities in our coverage universe,” wrote ATB Capital Markets analyst Amir Arif in a note last week. “As Canadian assets become a greater portion of the corporate mix, as organic production growth firms up, and as its resource life is better understood, we see room for the discount to the group to narrow.”
Coming & going: Pure Gold Mining (TSXV:PGM) has filed for creditor protection. The Vancouver-based junior brought the Madsen mine in Ontario into production early last year but results underwhelmed and the company was unable to raise sufficient funds to continue operations.